What Is an Appraisal?
Acquiring real estate can be the most significant investment most of us might ever encounter. Whether it's where you raise your family, a seasonal vacation property or an investment, purchasing real property is a detailed financial transaction that requires multiple people working in concert to make it all happen.
Most people are familiar with the parties having a role in the transaction. The most recognizable person in the transaction is the real estate agent. Then, the lender provides the financial capital required to fund the transaction. And the title company sees to it that all requirements of the transaction are completed and that a clear title passes to the buyer from the seller.
So, what party makes sure the value of the real estate is in line with the purchase price? In comes the appraiser. We provide an unbiased estimate of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Desert View Appraisals (602) 295-4690 will ensure, you as an interested party, are informed.
Appraisals start with the property inspection
To ascertain the true status of the property, it's our responsibility to first complete a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they really are there and are in the shape a reasonable person would expect them to be. To ensure the stated square footage has not been misrepresented and illustrate the layout of the property, the inspection often includes creating a sketch of the floorplan. Most importantly, we identify any obvious amenities - or defects - that would affect the value of the property.
Following the inspection, an appraiser uses two or three approaches to determining the value of real property: sales comparison and, in the case of a rental property, an income approach.
This is where the appraiser analyzes information on local construction costs, the cost of labor and other elements to ascertain how much it would cost to replace the property being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method.
Paired Sales Analysis
Appraisers become very familiar with the communities in which they appraise. They innately understand the value of particular features to the people of that area. Then, the appraiser researches recent transactions in close proximity to the subject and finds properties which are 'comparable' to the subject at hand. By assigning a dollar value to certain items such as remodeled rooms, types of flooring, energy efficient items, patios and porches, or additional storage space, we adjust the comparable properties so that they more accurately match the features of subject property.
An opinion of what the subject property could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true value of features of homes in the Phoenix Metro area, Desert View Appraisals (602) 295-4690 is your local authority. This approach to value is typically awarded the most importance when an appraisal is for a home purchase.
Valuation Using the Income Approach
A third way of valuing a property is sometimes employed when a neighborhood has a reasonable number of renter occupied properties. In this scenario, the amount of revenue the property produces is taken into consideration along with other rents in the area for comparable properties to derive the current value.
The Bottom Line
Combining information from all applicable approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. There are always mitigating factors such as the seller's desire to get out of the property, urgency or 'bidding wars' that may adjust an offer or listing price up or down. But the appraised value is typically used as a guideline for lenders who don't want to loan a buyer more money than the property is actually worth. At the end of the day, an appraiser from Desert View Appraisals (602) 295-4690 will help you get the most fair and balanced property value, so you can make the most informed real estate decisions.